Tuesday August 10th, 2021

The US$ & oil prices edge higher, equity markets strengthen while US yields are mixed amid hawkish Fed-speak. The US$ remains buoyed strong US jobs data, and comments from Fed regional presidents favouring tapering in coming months is keeping the US$ near 4-month highs. Monday’s US JOLTS job openings in June surged to a record high with the job opening rate rising to 6.5% from 6.1% previously. Focus shifts to Q2 Nonfarm productivity & Unit labor cost releases today. In other news, German economic sentiment tumbles 30% below of expectations as confidence declines sharply.  The US Senate is expected to pass the US$1T infrastructure package in a bipartisan vote expected today. Following the Infrastructure bill passing the US Senate will then turn their debate to the proposed US$3.5T budget plan. Covid, US covid cases, hospitalizations hit 6-month high amid a Delta variant surge. The EU won’t reinstate travel curbs on US citizens despite rising covid cases. China’s covid lockdowns could have economic costs to the world, says strategist. In currency markets, Euro tests fresh 4-month lows from a combination of a stronger US$ and weak economic sentiment. CNY strengthens 0.1% while Asian currencies are flat on average vs US$. Trading currencies are mixed with JPY, NOK & ZAR are down 0.2%, while NZD & MXN are flat, and AUD is up 0.1% vs the US$. US Infrastructure and covid updates alongside more US jobs data will provide intraday direction. 

Oil prices recover from 3-week lows as demand rises in Europe & the US outweighing the surge in Delta variants in Asia. Analysts believe oil prices should be supported by falling inventories & the prospect of a US infrastructure bill passing. C$ holds near 2-week lows as US tapering optimism increases on strong US jobs data. Oil prices rebound towards US$ 70pb for Brent Crude, but a break of 1.2605 (Jul28th) opens the potential of a retest of 1.2730 (Jul 21st). No key Canadian economic data this week, look for oil and covid updates, alongside the US$ to direct the loonie direction. Support holds at 1.2475, while resistance resets to 1.2605 if breached 1.2730 next. 

Euro stalls near 4-month lows amid weak German data and a stronger US$. The weak German ZEW economic sentiment led to the overall EU ZEW Economic Survey dropping to 42.7 vs expectations of 72.0. Euro remains under selling pressure as investors continue to favour the US$ after a combination of strong jobs data and the prospects of US tapering. Euro remains vulnerable to further weakness vs US$ and GBP with the potential of testing 1.1602 (Nov4th) & .8274 (Feb2020) respectively. Support holds 1.1702 (Mar 31st) while resistance drops to 1.1790.

EURGBP extends its weakness breaching 4-month lows and looks set to retest to Feb2020 levels from a strengthening US$, BoE hawkish and falling UK covid cases. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).

GBP holds above 2-week lows despite US$ strengthening and domestic political concerns. The prospect of Fed tapering as US jobs data post stronger gains which continues to boost US$ strength. The former Brexit party leader Farage “slammed” France and the EU for failing to “lift a finger” to prevent the cross-channel migrant issue, increasing Brexit tensions. Adding further pressure to the pound is concern that the UK PM is looking to demote Finance Minister Sunak. Intraday US Infrastructure and covid updates will dictate intraday direction. Support resets to 1.300 while resistance holds at 1.3930.